Non-Traditional Exports in the Andes

I'm a regular reader of Peruvian economist and La Republica columnist Humberto Campodónico -- for New Zealand readers, sort of a cross between Brian Easton and Rod Oram. Campodónico writes dense, detailed columns on the world and Peruvian economies, with particular attention to national policies on natural resources such as minerals, petroleum and gas. He is a trenchant critic of what he argues is the Peruvian government's unreformed neoliberalism, its lack of a coherent plan for development and its pandering to the whims of international investors in extractive industries.

Campodónico often resembles a traditional investigative journalist, as he strings together data and timelines to demonstrate how resources have been given away cheaply or tax revenue needlessly wasted. It's hard to imagine a columnist with such a wonkish, fact-based approach, which requires readers to really concentrate, getting such a prominent slot in a New Zealand newspaper.

A particularly interesting recent column compares the progress in developing "non-traditional exports" in Peru, Chile and Colombia. In Latin America, "traditional" exports refer to primary materials such as minerals and petroleum and unprocessed cash crops such as bananas and sugar. These have often been dominated by international coporations operating in economic "enclaves". "Non-traditional" exports are those with a greater value-added content: often, though not always, they are produced at a smaller scale, are more labour-intensive and tend to be locally owned.

A rise in non-traditional exports can be viewed as one measure of the strength of a developing country's economy. Exports are of course important because they provide the foreign currency needed to buy things that aren't produced locally and to pay for borrowing. A higher proportion of "non-traditional" products may indicate greater economic sophistication, resilience and broader participation. For Campodónico, they represent "the insertion of the local entrepreneurial classes in the world market".

In this respect Chile, Colombia and Peru are worth comparing because they are the medium-sized South American countries that have opted to continue with orthodox "market" economies, as opposed to the "Bolivarian" triumvirate of Venezuela, Ecuador and Bolivia, who have built strategies around greater state control and redistribution of the rents from raw materials.

According to the respective central banks, in 2008 Chile exported $65 billion USD, of which 41% was earned by non-traditional exports (mainly food products such as fish, fruit and wine). Colombia exported $37.6 billion, with 47% non-traditional (chemicals, paper, textiles, leather and food). Meanwhile, Peru exported $31.5 billion, with just 25% from non-traditional products (metallurgy, textiles and agroindustrial products).

Campodónico also notes that state-owned companies were responsible for about a third of the "traditional" exports in Chile and Colombia, whereas in Peru most mineral extraction is done by foreign, privately-owned companies.

These statistics show Peru to be significantly weaker than its two Andean neighbours -- a useful counter to triumphalism about its recent recent rate of growth in GDP. This perspective helps raise the questions: how much of this growth is being distributed among ordinary Peruvians? How much is being usefully reinvested? And, can it be expected to last?

Andean nations, Peru, development, exports,

Dispatches in Transit

When it was my turn to step forward to the Peruvian immigration desk, the official was pulling the surgical mask far enough away her face to be able to speak into a cellphone. She was talking to her daughter. It seemed that a particular tradesman was supposed to turn up at their house by 8 pm that evening but had never arrived. There was now a new appointment, for around 10am the next morning. "Don't worry, mi hijita", she said. Your papá will be there as well". Back in Peru, I thought, grinning as the official stamped my passport. "Have a good trip", she said. "Thanks for waiting".

My taxi driver to the centre of Lima also had a surgical mask on. As we drove away from the aiport he pulled it off with a grunt of annoyance. "Can't stand wearing this thing", he told me. "The muncipality makes us, or we get fined".

Earlier in the day, at Santiago airport where I stopped over for 7 hours before the connecting flight to Lima, there were also official precautions against the H1N1 influenza. Everyone who got off the plane, whether entering Chile or in transit, was redirected into a little side room where they had to fill out a form giving contact details and declaring any flu-like symptoms, and then join a rapidly growing line to have a photo taken by a single masked official. The official repeated the same mantra over and over: Permanezca inmovil. Mire directamente a la cámara. Gracias. Puede continuar. ("Stay still. Look directly at the camera. Thank you. You can continue"). After the first twenty or thirty photos everything became more efficient, and the official had to cut himself off: Permanezca inmovil. Mir--Gracias!

I couldn't help wondering what the Chilean authorities were going to do with all that data (starting with around 300 passengers on just one full Airbus). With the forms being handed out and collected separately, it just required a couple to get out of order to frustrate any matching process with the photos. As for contact details, the only useful thing on my form was my email, which I think was probably illegible.

Peru was less counter-productively obsessive. All passengers getting off had to fill out a form about symptoms, and there were two nurses from the Callao health service waiting bashfully by the plane door to offer "advice or assistance", but no compulsory photo session. The masks, however, were just as ubiquitous.

My taxi driver from the aiport was friendly enough, but not very talkative. I told him it was first time in Peru for over two years; I imagined quite a bit had changed. He laughed briefly. "Nothing much has changed", he said. " You'll see". He looked dead tired, and said he had been working since 7 am, and would continue until dawn."Why do they make you work such long hours?", I asked. "I requested it", he said. He told me that he earned a fixed rate of 950 soles per month, around $300 USD. The extra hours would get a bonus, but according to my driver, shaking his head sadly, "it's not enough".

Bush Threatened Chile Over Iraq Vote

Spanish newspaper El Pais has published the transcript of a conversation between former Prime Minister Jose Maria Aznar, George Bush, and Condoleeza Rice at Bush's ranch in Crawford, Texas, four weeks before the invasion of Iraq in 2003. In the conversation Bush announced his intention to be in Baghdad "by the end of March" and also threatened to derail Chile's free trade agreement with the US if the Latin American nation did not back a planned second resolution on Iraq in the United Nations Security Council.

In the conversation, apparently recorded by then Spanish ambassador Javier Rupérez, Aznar asked Bush to help him secure domestic support for action against Iraq and stressed that "it's not the same to act without [the resolution] as with it". Bush assured him that "the text will be made as far as possible to help you. I'm pretty easy on the content". He told Aznar that: "Saddam Hussein is not disarming. We have to get him now...There's two weeks left. In two weeks we'll be militarily ready...We'll be in Baghdad by the end of March".

Discussing the level of Security Council support for a second resolution, Bush said that"countries like Mexico, Chile, Angola and Cameroon (temporary Council members at the time) should know that what's at stake is the security of the United States, and act with a sense of friendship towards us. [Chilean president Ricardo] Lagos should know that the free trade agreement with Chile is awaiting confirmation in the Senate and that a negative attitude in this matter could endanger its ratification".

Chilean newspaper La Nacion said that the story had been confirmed by current Chilean ambassador to the United Nations Heraldo Muñoz, who at the time was a government minister. Muñoz told a Chilean radio station that the account of threats to Chile suggested by the transcript "basically fit the truth". According to Muñoz, after "very serious discussion", the Chilean government concluded that its foreign policy of multilateralism and respecting international law could not be sacrificed.

Muñoz said that in the view of the Chilean government while there was “a certain risk for the TLC", it was decided to trust that "a lot had already been invested by the United States and ourselves in many rounds of negotiation and there weren't going to be backwards steps because if there wasn't a treaty with Chile, with which Latin American country would there be?".

The Chilean government thus agreed that "it was worth defending [our] longstanding foreign policy principles", said Muñoz.

The US-Chile free trade agreement was ratifed by the US Congress in the last week of July 2003.


Categories: Jose Maria Aznar, George Bush, iraq, Iraq, Chile, Security Council , second resolution

That's My Piece of Sea

Like grownup siblings still embittered by a childhood dispute, Peru and Chile seem determined to draw out the consequences of the 19th-century War of the Pacific as long as possible.

Domainating the attention of politicians and media at the moment -- especially in Peru -- is the question of the maritime border.

Peru maintains that, while its land border with Chile was set by the Treaty of Arica in 1929, the maritime limits have never been satisfactorily settled. However, Chile says that the maritime border was defined by two fishing treaties signed in 1952 and 1954.

The technical controversy is over whether each country's 200-mile exclusive economic zone should be delimited by the geographical parallel, as agreed in the fishing treaties, or by a bisection of imaginary lines perpendicular to the respective coastlines, as established by the 1982 United Nations Convention on the Law of the Sea (see diagram, taken from Wikipedia entry on the topic.)



Peruvian governments have been trying to begin negotiations on the matter since 1986. The Chilean response has always been that the matter is settled by the fishing treaties, so there's nothing to discuss.

In 2005 the Peruvian congress drew up a law to define the 200-mile maritime zone over which it has sovereignty. This included about 38,000 sq km of water currently under Chilean adminstration -- the shaded area in the map.

With no progress possible through diplomatic channels, Peru decided to take the case to the International Court of Justice in The Hague, a decision announced by president Alan Garcia in his discourse to the nation on 28 July this year.

A preparatory step was to draw up a a cartographic map illustrating the area claimed as sovereign by Peru. The map was published in the official daily El Peruano on 12 August, prior to being presented to the United Nations

Chile's response to the publication of the map was one of official surprise and offense, claiming that the map was a unilateral action that 'ignored' the existing treaties. Chilean foreign minister Alejandro Foxley sent a formal note of protest to the Peruvian ambassador and called the Chilean amabassador to Peru back to Santiago for consultation.

But Peruvian representatives responded that there had been plenty of warning of the process that was to be followed, and Chile had been forewarned of publication of the map

Rising tensions were defused when the earthquake struck southern Peru on August 17, and Chile was among the first countries to send aid to the victims.

However on 23 August Foxley further complicated the matter, stating that settlement of long standing Bolivian claims for access to the sea could be prejudiced by Peru's claims. But this was brushed aside by Bolivian president Evo Morales, who said on a visit to the eathquake zone in Pisco that "I know the Peruvian government isn't going to be an obstacle to resolving this matter with Chile".

The whole debate is put into perspective by an entertaining piece of reportage from Rodrigo Barria Reyes of Chilean paper El Mercurio. Barria Reyes describes the fruitless search by a 518-tonne, 33-man Chilean navy vessel for a tiny 4-man Peruvian fishing vessel suspected of entering Chilean-controlled waters without permission.

The main target for Peruvian fisherman from the port of Ilo is the blue shark, whose fins are considered in some Asian markets to have potent aphrodisiac properties To reach international waters where the sharks are abundant, boats have to cross the Chilean-patrolled zone. Those that don't request permission, or fish in Chilean waters, are towed back to Arica where their cargo is dumped and they are fined and deported.

In this case the Peruvian boat was trespassing, but made a quixotic dash back into Peruvian waters before the Chilean navy could catch it. El Mercurio reports that the fisherman braving the high seas in search of shark fins make $600 for a 15-day trip. Meanwhile, Peru has set aside $2 million USD to fight the court case in The Hague.

To an outside observer, it seems incredible how much importance is attached to a patch of ocean. It's appropriate that the El Mercurio article described the tiny fishing boat as 'Lilliputian', because the way in which arcane details of geography are being scrutinised by politicians, lawyers, historians and bloggers in both countries is reminiscent of something from Gullivers Travels.

To be fair, the leaders of both countries have been at pains to stress that border issue is completely separate from the two nations' economic and social relations. Both governments have tricky balancing acts to maintain. Foxley and president Michelle Bachelet need to placate the hawks in opposition who accuse them of having a muddled and over-accommodating foreign policy, while Garcia needs to stay a step ahead of Peruvian nationalists like Ollanta Humala who are always ready to stir up anti-Chilean feeling.

Far more than the material value of the territory itself, the current fuss is a reflection of the place that the War of the Pacific continues to play in both countries' collective psyches. And while it seems to be Peru that continues to obsess over the past, some Chileans argue that there's a lot their country could do to restore good will. In a guest column in La Republica, Chilean journalist and university professor Felipe Bianchi Leiton said that Chile should formally apologise to Peru for selling arms to Ecuador during its border dispute with Peru in 1995 -- when Chile was supposed to be a guarantor of the peace.

He further argued that Chile should return the books stolen from the library of Lima during the War of the Pacific, and give up disputing denomination of origin rights for pisco. Finally, Leiton stated that Chile must accede to the Peruvian request to extradite ex-president Alberto Fujimori to face trial in Peru.

But the effort to make Fujimori face trial is a different question altogether.

Categories: Chile, Peru, maritime border, limite maritimo, Alan Garcia, Evo Morales, Alejandro Foxley

The Many Roads to Development

I've spotted several good articles or reviews recently on economic development. I'm just going to link to one here, but there's others which I'll summarise in further posts.

Together, they represent part of a growing body of opinion against the Wall Street Journal-style platitude that developing countries just need enough 'free market reforms' to become wealthy and stable. Even many US thinkers are now seeing this 1990s-esque triumphalism as at best simplistic and unbalanced, at worst deeply hypocritical given the histories of wealthy countries themselves.

What's interesting is the increasing range of more-or-less centrist economists, historians and journalists making many of the same points as Eduardo Galeano's The Open Veins of Latin America -- though without quite the colorful, stirring prose.

A particularly succint and insightful piece is a critical review by former New Yorker writer James Surowiecki of Indur M. Goklany's The Improving State of the World: Why We're Living Longer, Healthier, More Comfortable Lives on a Cleaner Planet.

Goklany's thesis is one that Surowiecki doesn't fundamentally disagree with (and neither do I): the onset of industrialization in the eighteenth century and the application of technology through practices loosely describable as 'capitalism' have delivered unprecedented benefits to humanity. Not only has economic growth made us all wealthier, but it's allowed us breathing space to care about the environment enough to arrest and reverse its degradation.

Or as bluntly summed up by New Zealand National Party environment spokesperson Nick Smith at a debate I attended, 'if you want to be clean, first you've got to be rich'

It's the intellectually honest starting point from which I wish more of the environmentalist millenariasts and 'smash capitalism' activists would start: those of us born in the Western world in the last few decades are comfortably the luckiest people ever to have lived. Our ability to become passionate about issues beyond scraping together our next meal is substantially dependent on the system that we are critiquing.

What Surowiecki does reject is the faith in economic growth as some irresistible, almost Marxian historical force that inevitably delivers human and environmental improvments.

This greatly understimates the historical struggles to win a share of industrial wealth for ordinary working people, improve health, and address pollution and other environmental problems. In many cases, real gains have only been achieved though those deeply unsexy measures -- governmental regulation and intervention.

Such faith also takes insufficiently seriously the fact that large parts of the world -- the so-called 'developing' countries -- have not benefited anything like as much from the industrial age as the 'Western' nations.

True, as Surowieci acknowledges, they've experienced significant advances in areas such as health and longevity, thanks to the 'trickle-down' dispersement of improvents in medicine, engineering and agriculture, while remaining relatively poor. But there's also Galeano's case to be answered that the very success of the Western nations was partly on the back of the dominance and exploitation of the 'developing' world.

What's most irritating is the use by neoliberal theorists of the broad-brush historical view to evangelise for something they glibly call 'free markets'. Boiled down, it turns out all anyone needs to do is apply a set of formulas derived from Milton Friedman and distilled by the IMF (reduce government spending, deregulate, privatize, drop trade barriers, etc), and hey presto!, everything will get better.

In support of this case, free-market fundamentalists like to point out that, in the last 30 or 40 years while their ideas have held sway, even aggregate global inequality has reduced. But the obvious riposte (made by Surowiecki) is that almost all of this is due to the success of China and India. The approach of both these countries has been heterodox, in their own time, and on their own terms. Meanwhile, the parts of the world that have followed IMF prescriptions -- including much of Latin America and Africa -- have stagnated or only made painfully slow advances.

Even paragons of development through economic othodoxy such as Chile and Botswana show divergence from the formula. The engine of Chile's development -- copper -- remained under state control even during the time of Pinochet. And Botswana is one of the world's largest producers of diamonds. These two countries may just be examples of not stuffing up the mixed blessing of being resource-rich, rather than demonstrating the transformational magic of a narrow set of economic policies.

In short, there may be certain broad policies that are necessary (but not sufficient) for economic success. But achieving this is a complex business, more dependent on the specific historical, social and geographic circumstances of a country than any formula from a textbook. And the improvement of human and environmental well-being is something that must be fought for in its own right, not simply a slag-like byproduct of the economic growth engine.

The summation comes best from Surowiecki himself:

The fact that every country's experience is different does not mean that there are not deeper truths to be uncovered by looking at the experience of the world as a whole. But the truths thus far uncovered are relatively few in number and often limited in impact. So, yes, free trade is a good thing, subsidies to agriculture and official corruption are bad things, and so on. And policymakers should be aggressive in implementing those practices and policies that there is a good reason to think will work. But they also need to be cautious about taking theoretical pronouncements for reality, and they should be pragmatists rather than evangelists. After decades of misplaced certainty, it may be time to recognize the limits of our own knowledge -- at least if we want the state of the world to continue improving.

From my own unschooled point of view, I might posit the 'general truth' that one of the key things a country needs to get ahead is the autonomy and control to decide and implement what works for them -- rather than being forced into a straitjacket set of textbook-derived policies that may be unhelpful or even counter-productive. That would be close to my definition of 'freedom'.

Categories: free trade, economic development, Latin America, Africa, environment, labor

What I'd Left Out

There just hasn't been time to update the blog over the last week and a half. I have to do a bullet point list of where I've been and what I 've done.

As I mentioned, we got to Iquitos in three days and three nights on the boat from Pucallpa. I'll put together a whole story on that some other time.

I was over a week in Iquitos. As well as the motorbike classes, I also participated in an ayahuasca ceremony, which I suppose did "cleanse" my body through repeated vomiting, but disappointingly didn't produce any psychdelic experiences.

We went to visit the Boras and Yahuas tribes, about half an hour from Iquitos by boat, and bought more miscellaneous arts and crafts, while they jumped into native costume, performed a brief traditional dance, and charged us for the experience.

We also visited the "serpentario", an animal santuary perched above the river which included a tame anaconda amenable to being photographed draped around the neck of tourists.

Not to mention the social life and numerous invitations to people's houses to be stuffed full of local cuisine.

Tuesday morning at 6:00 am I took the fast, but extremely cramped, boat to Leticia, wher the frontiers of Peru, Colombia and Brazil meet. I spent four days in Leticia, undertaking some investigations about which I hope to be able to write in more detail some time in the future.

There was another trip to a native community, and some more handling of another anaconda, this time wild, which had eaten seven of the local chickens, and had recently been captured.

On Friday the "dry law" started in Colombia; presidential elections were on Sunday, and no alcohol was allowed to be served throughout the country during the weeknd, presumably so all voters would make a sober choice. To address this inconvenience, we left the country - several blocks down the street into the Brazilian town of Tabatinga.

This didn't turn out to be such a good idea, as the next morning I very nearly missed my flight to Bogota, luckily being saved by my new Letician friends who came to my hotel and woke me up.

I spent the evening in Bogota at the comfortable house of a friend of a friend, and the next day took a taxi through the very quiet city to the airport to catch my flight to Santiago. Seven hours of pleasant flight in the company of a very gregarious girl from Bogota who was going to study in Australia, and I was at my second to last stop.

My uncle and aunt, who live in Viña del Mar, very kindly picked me up, and that's where I am now. My body has had soemthing of a "what the hell have you ben doing to me these last five weeks" attack over the last couple of days, but now I'm on the mend.

Tomorow I'm heading back to Santiago to catch up with a couple of people, and then it's back to NZ and to work. Another time, another place, another life.